Gordon Brown later praised the Speaker's professionalism but said that the Commons could no longer operate as a "gentlemen's club", in a damning criticism of Mr Martin's failure to get to grips with abuses of the expenses system.

Mr Martin's spokeswoman said the Speaker would also stand down as MP for Glasgow North East on June 21, sparking a by-election in the traditionally safe Labour seat.

It is expected that Mr Martin will be given a peerage on quitting the Commons, though his spokeswoman declined to confirm this.

In a statement read to the Commons at 7.30pm, following a meeting with party leaders, Mr Martin announced that a "robust" set of measures had been agreed to reform the allowances system.

The Speaker said MPs would no longer be allowed to claim for items such as furniture, household goods, cleaning and stamp duty on their second homes.

He added that MPs selling property had to be "completely open" with the tax authorities in relation to capital gains tax, while mortgage interest claims would be capped at £1,250 per month.

The Speaker stressed the "fundamental reform" of allowances would move from self-regulation to regulation by an independent body.

It has also emerged that former Tory minister Ann Widdecombe would be willing to stand as an interim Speaker before the election of Mr Martin's successor

His resignation came as it was announced that The Daily Telegraph will not face a police inquiry over the disclosure of MPs’ expenses.

Speaker Martin has become the highest-profile victim of the Westminster MPs' expenses scandal, which claimed another scalp today.

Tory MP Douglas Hogg, ridiculed for claiming for his country house moat to be cleaned, announced he would not be standing in his Sleaford and North Hykeham constituency at the next election in the wake of the row.

Gordon Brown, the Prime Minister, said later that no MP who had defied the rules on their Commons expenses would be allowed to stand for election as a Labour Party candidate.

After addressing a meeting of Labour's ruling National Executive Committee, the Prime Minister also promised "major changes" in the system of MPs' expenses.

Speaker Martin's position became untenable after he lost the support of MPs over his handling of their expenses system.

The disclosure in The Daily Telegraph that his staff had encouraged members to claims for "phantom" mortgages provoked fierce criticism.

This morning a motion calling for his immediate resignation appeared on the Commons order paper signed by 23 MPs from across the political spectrum.

Douglas Carswell, the Tory MP who tabled the motion, said he hoped Mr Martin's successor would have the moral authority to push through reforms that would "restore dignity to politics".

"It gives me no pleasure to have done this at all, but it was necessary to do it. We need a new Speaker who understands that 'sovereignty of Parliament' is shorthand for 'sovereignty of the people'," he said.

A Labour MP who has signed the no confidence motion and clashed on Monday with Mr Martin in the Commons welcomed the news of his imminent resignation.

"That is the right and honourable course to take. His resignation will be the first step in the House recovering its reputation," he said," David Winnick said.

But Austin Mitchell, a Labour backbencher, described the treatment of Mr Martin as a "public humiliation" and accused his opponents of being motivated by snobbery. "Partly it is a class issue," he said.

Later this afternoon Mr Martin is due to hold emergency talks with party leaders over how to reform the expenses system. Downing Street said that it expected this meeting to go ahead.

In astonishing scenes in the Commons on Monday, MPs ignored centuries of convention and openly argued with the Speaker as he struggled to get to grips with the crisis engulfing Westminster.

Despite making an unprecedented apology to the country, Mr Martin’s statement descended into chaos with MPs on all sides urging him to go.

One veteran Tory MP likened the mood to that of the Norway debate in 1940 when Neville Chamberlain was urged: “In the name of God, go.”

Mr Martin’s position has been in jeopardy since he clashed last week with MPs over the Telegraph’s investigation. He told the Commons on Monday: “Please allow me to say to the men and women of the United Kingdom that we have let you down very badly indeed. We must all accept the blame and, to the extent that I have contributed, I am profoundly sorry.”

But by not addressing his own future, he caused outrage among many MPs. They demanded that he go, or at the very least allow a debate of confidence. Mr Brown attended the Speaker’s statement but his aides were keen to stress that this should not be seen as a sign of his tacit support for Mr Martin.